Moody’s: New surcharge ‘positive’ for PREPA creditors

Moody’s Investors Service said Monday the new surcharge on customers’ electricity bills approved last week by the Puerto Rico Energy Commission to be used to pay debt service on new securitization bonds to be issued as part of the Puerto Rico Electric Power Authority’s debt restructuring is positive for creditors.

“We view the Energy Commission’s action as positive for existing PREPA bondholders as it indicates regulatory support for PREPA’s restructuring plans and further advances the prospects of an organized debt restructuring,” the ratings agency said.

A key component of PREPA’s debt restructuring is the issuance of new securitization bonds that will be exchanged for existing PREPA bonds at a discount. The new securities will be supported by a separate, non-bypassable surcharge on ratepayer bills, to be issued by the Puerto Rico Electric Power Authority Revitalization Corp.

The Energy Commission approved PREPA’s request for a 3.1 cent per kilowatt hour non-bypassable surcharge, along with all elements of the rate calculation methodology including the mechanism to adjust charges periodically.

“Together, this decision helps provide a dependable revenue stream that will satisfy debt-service payments on the new securitization bonds. The Energy Commission’s approval of this surcharge and the related methodology indicates significant regulatory support within the commonwealth for the PREPA restructuring,” Moody’s said.

PREPA’s next debt service payment of about $424 million is due July 1, and “we believe that this payment will require additional funding from PREPA’s creditors to avoid a payment default. As such, while the Energy Commission’s decision is an important step that provides tangible evidence the PREPA restructuring is moving forward, execution risk remains,” Moody’s said.